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Company Law Question Paper

Company Law

Course:Cpa Part Ii

Institution: Star College Of Management Studies question papers

Exam Year:2009

QUESTION ONE
a. Outline the circumstances under which a company is deemed to be a subsidiary of another company (4mks.)

b. Upendo Company was registered five years ago as an unlimited company. Its main object was to offer humanitarian services to the less privileged members of the society. The company has since grown into a large undertaking. The members wish to convert the company into a limited company and seek your legal advice.

Advise the members of the following issues:

i. The procedure to be followed in converting the company from an unlimited company to a limited company (4mks)

ii. The legal effect of such a conversion on the rights and liabilities of members (4mks.)

c i. Highlight the ways in which a company may reduce its capital(4mks)
ii. Outline the circumstances under which a court would confirm the reduction of capital of a company (4mks.)

QUESTION TWO

a. Explain the implied terms in a contract of sale of shares between the seller and the buyer (6mks.)

b. Highlight the circumstances under which a company would decline to register a transfer of its shares (6mks.)

c. Amos Kwetu bought shares from ABC Ltd. Upon inspection of the register of members of the company, Amos Kwetu realized that his name was missing. The company has refused to rectify the anomaly. Amos Kwetu is aggrieved and seeks your legal advice. Advise him on the legal provisions which govern the rectification of the register of members of a company (8mks.)

QUESTION THREE.

Hard Wood Company Ltd. obtained an overdraft of sh. 5 million from Countrywide Bank Ltd. Five years ago. As a security, Hard Wood Company Ltd. executed a debenture, creating a fixed charge over the company's factory and freehold premises and a floating charge over all of its other assets. The company has not been performing well and its balance sheet shows that the company is heavily in debt. The company also borrowed a loan from a friend of one of the directors which is still
outstanding. Countrywide Bank Ltd. has appointed a receiver. Upon moving in, the receiver has discovered that a memorandum of satisfaction was lodged with the Registrar of Companies three years ago and as a result, the charge was discharged. However, the bank still holds the title deed and the charge documents.

a. Discuss the legal principles applicable in the above case and advise the bank (12mks).

b. The receiver has further discovered that Timber Yard Ltd. is claiming at least 75% of the timber at Hard Wood Company Ltd's yards, on the ground that Timber Yard Ltd. sold it on credit and is an unpaid seller. Discuss the rights of Timber Yard Ltd. over the timber it supplied to Hard Wood Company Ltd. (8mks.)

QUESTION FOUR.

a. " A person dealing with a company is entitled to assume, in the absence of facts putting him on doubt, that there has been due compliance with all matters of internal management and procedure required by the articles."

With reference to the rule in Royal British Bank vs. Turquand (1856), discuss the above statement (12mks.)

b. A director is said to be in a fiduciary relationship to his company. Explain the remedies available to the company for breach of these fiduciary duties (8mks.)

QUESTION FIVE.

a. Highlight the provisions of the Co-operative Societies Act and Rules (2004), which govern the receiving of deposits and loans by a co-operative society by persons who are not members of the co-operative society. (6mks.)

b. Explain the functions of the supervisory committee of a co-operative society. (4mks.)

c. Enumerate the provisions of the Co-operative Societies Act (2004) which govern the convening of a special general meeting of a co-operative society. (4mks.)

d i. Identify two types of foreign companies recognized under the Companies Act (2mks)

ii. Outline the legal provisions which govern the issue of a prospectus for subscription of shares of a foreign company (4mks.)

QUESTION SIX.

a. Sand Harvests Ltd. intends to petition for the winding up of Delta Construction Company Ltd. You are requested to advise them on the following matters:

i. The procedure for winding up of a company by the courts (5mks.)

ii. The consequences of a winding up order (5mks.)

b. Distinguish between a scheme of arrangement and a reconstruction of a company (6mks.)

c. Discuss the rights of the dissenting shareholders under an amalgamation by purchase of shares (4mks.)

QUESTION SEVEN.

a. An auditor has been described as "a watchdog but not a blood hound" Re: Kingston Cotton Mills Company (1896).

With reference to the above statement, describe the duties of an auditor and the remedies available to a company whose auditor has been negligent (10mks).

b. You have been appointed the Company Secretary of Maarifa Company Ltd. Prepare a memorandum advising the directors on the following matters:

i contents of a statutory report (6mks)

ii. Disclosure of interest in a
contract by directors (4mks)

Company Law Question Paper

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